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Business behavior following Wal-Mart class-action ruling

June 22, 2011

U.S. Supreme Court Decision In Wal-Mart Class Action Case Signals A Victory For Large Employers— Three advice items for business behaviorBarran Liebman
Oregon Law Firm

In a decision released early this morning, the U.S. Supreme Court ruled that a proposed sex-discrimination class action with a class of 1.5 million female Wal-Mart employees could not proceed as a class action because the employees could not show that their alleged injuries had a common factual basis.

Although the 1.5 million employees worked in stores throughout the United States, and many of the promotion and compensation decisions they complained about were made by locally based supervisors, the employees alleged that a class action was appropriate because the decisions were not individualized but instead were part of a “corporate culture” at Wal-Mart that actively discouraged women from advancement. The Court disagreed with the premise that these claims could be asserted in a class action, finding that the employees did not adequately explain how millions of discretionary employment decisions made by numerous managers and supervisors all over the country could stem from a common basis, which is necessary for a case to proceed as a class action.

The Supreme Court’s decision is most applicable to large employers like Wal-Mart, which because of their size necessarily have to make lots of small-scale employment decisions that (when looked at all at once) may provide grounds for allegations of discrimination. However, there are some “take-aways” for employers of any size:

Discretionary Decisionmaking Isn’t Inappropriate On Its Face. The plaintiffs in the Wal-Mart case had challenged the company’s decentralized discretionary decisionmaking. The Supreme Court clarified that while a discretionary decisionmaking policy can result in discrimination; it is not illegal on its face and may be a smart business decision.

Have and Enforce Strong Anti-Discrimination Policies. The Court paid attention to Wal-Mart’s strong policies and culture of enforcement.

Support Decisionmaking With Good Documentation. If discretionary decisions are challenged—and challenges will continue—employers must be in a position to explain why they were made. Strong and appropriate documentation is critical to surviving challenges.